Unlocking Customer Benefits: Can Waitrose’s Fortunes Soar with an Amazon Partnership?

When Waitrose and Ocado severed ties in 2020, the competition among grocers intensified. With the surge in demand for online delivery during the pandemic and the growing popularity of budget retailers due to the cost of living crisis, supermarkets have been under pressure to work harder. While Waitrose has managed to stay strong, experts believe that its online delivery capabilities have suffered. Rumor has it that Waitrose is currently in talks with US online retail giant Amazon to strike a deal that would boost its market share. In this article, we explore what Amazon could bring to the table for Waitrose and the potential impact on customers.

Primed for Success

According to Kantar data, Waitrose currently holds a 4.6% share of the UK grocer market, which is significantly smaller compared to Tesco’s market share of over 25% and the increasing dominance of budget retailers. While the cost of living crisis has helped Lidl and Aldi gain market share, Waitrose’s online delivery service continues to grow. The supermarket reported a 40% increase in demand compared to the previous year, and its recent results show that online sales represent over 14% of Waitrose’s total sales this year. This is higher than the average market share of 10.7% for online sales in the 12 weeks leading up to October 1, 2023. Waitrose remains competitive with larger retailers, charging a minimum delivery order of £40 and a delivery fee of £3, similar to Morrison’s and Tesco.

The Struggles of Waitrose

Despite its online success, Waitrose has been facing stiff competition from both the “big four” supermarkets and discount retailers. One of the main reasons for this is the difference in store size. Waitrose has only 329 stores in the UK, while Tesco has over 4,000 and Sainsbury’s has over 1,000. Neil Saunders, managing director of GlobalData Retail, believes that Waitrose’s issues go beyond store size and slow sales growth. He states, “Waitrose has a problem with its sales line. It’s losing customers and market share. In terms of volume, it’s selling less, which is detrimental to both profits and efficiency. Increasing sales and volume is crucial for Waitrose.”

Since ending its 20-year partnership with Ocado in September 2020, Waitrose has been struggling to persuade shoppers to use its own online delivery website. Its attempts to improve its online capabilities, such as establishing partnerships with delivery services like Deliveroo and Uber Eats, have not been enough to form a loyal customer base. This is why the reported partnership talks with Amazon make sense for Waitrose. Amazon’s strong distribution network and infrastructure could help Waitrose overcome its costly logistics issues and deliver a more efficient online shopping experience.

Implications of a Waitrose-Amazon Deal

If a deal with Amazon materializes, Waitrose customers can expect a more seamless delivery process. However, the retail experts believe that the partnership is unlikely to result in lower prices for products and delivery. Jonathan De Mello, founder of JDM Retail, states, “I don’t see why it would be cheaper. I think the prices will be comparable to competitors, but the focus will be on efficiency and leveraging Amazon’s superior distribution network. This could lead to more delivery slots and faster deliveries, enhancing the overall shopping experience.”

While Waitrose’s potential partnership with Amazon could bring better availability of products for delivery and help increase the supermarket’s market share, it’s unlikely that other supermarkets will follow suit. Major retailers like Tesco and Asda already have a wide-reaching presence and may not need to rely on Amazon’s expertise.

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